ITAT upholds CIT(A)'s decisions, dismissing Revenue's appeal. No disallowance under section 14A. Tenancy right payment considered revenue expenditure.

The ITAT upheld the Ld. CIT(A)'s decisions in both issues, dismissing the Revenue's appeal in its entirety. Regarding disallowance under section 14A, it was ruled that since no exempt income was earned, no disallowance under section 14A was permissible. Concerning the disallowance on the purchase of tenancy right, the payment was considered a revenue expenditure as the assessee benefited from using the premises without acquiring a capital asset.

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Issues:
1. Disallowance under section 14A of the Income Tax Act.
2. Disallowance on purchase of tenancy right.

Analysis:
1. Disallowance under section 14A:
The Revenue appealed against the deletion of disallowance under section 14A by the Ld. CIT(A). The AO calculated a substantial disallowance under Rule 8D(2) due to the assessee's investments potentially generating exempt income. However, the Ld. CIT(A) ruled in favor of the assessee, stating that since no exempt income was earned, no disallowance under section 14A was permissible. The ITAT upheld this decision, citing previous case laws supporting the assessee's position, emphasizing that if no exempt income is earned, disallowance under section 14A is not warranted.

2. Disallowance on purchase of tenancy right:
The AO disallowed a payment made by the assessee for the purchase of tenancy rights, considering it as capital in nature. The Ld. CIT(A) examined the facts and submissions, where the assessee argued that the payment was a revenue expenditure as no enduring benefit or capital asset was acquired. The Ld. CIT(A) agreed with the assessee, allowing the payment as a revenue deduction based on commercial considerations. The Revenue appealed this decision. The ITAT reviewed the case and noted that the payment was made for obtaining premises on lease, not for purchasing a capital asset. Citing the Madras Auto Service case, the ITAT concluded that the payment was a revenue expenditure, as the assessee benefited from using the premises without acquiring a capital asset. The ITAT upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal.

In conclusion, the ITAT upheld the Ld. CIT(A)'s decisions in both issues, dismissing the Revenue's appeal in its entirety.

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